By Joanne Frearson Eastern European funds are overweight in Poland, Russia and Hungary while they a...
By Joanne Frearson
Eastern European funds are overweight in Poland, Russia and Hungary while they are underweight in the Czech Republic, Slovenia, Croatia and the Baltics, according to the latest analysis by fund research house, Forsyth Partners
According to the report, it has been a disappointing few weeks for the emerging markets of Europe, Africa and the Middle East, with the exception of Russia, which surged ahead by 20%. The market weakness was in part due to poor sentiment in the global telecoms sector (as telecoms stocks dominate Central European indices) and partly due to disappointing macroeconomic data.
Poland declined by 4%. Forsyth's head of emerging markets, Jacqueline Aldhous, said: "The Central Bank's announcement that it would not meet its inflation target of 5.4%-6.8% for 2000 and its rate hike of 150bp on 31 August all dented confidence in the market. Mounting concern over increasing foreign competition in the IT sector was yet another concern."
Funds which favour Poland are: Danubia Invest 38.9%, Fleming Eastern European Fund 44.8%, Indocam Europe Nouvelle 49.8%, MC Premium Eastern European Equities 40% and UBS Central Europe Equity Fund 41.6%.
Hungary fell by 1.9% and remained weak on negative news surrounding the oil and gas company, MOL, and the government's announcement that it would be freezing drug prices for the coming months as an anti-inflationary measure.
Funds which both favour the Hungary and Poland markets are Danubia, Invest, Indocam Europe Nouvelle, MC Premium, Eastern European Equities and UBS Central Europe Equity Fund.
Funds which favour the Hungary market are: Danubia, Invest 32.1%, Indocam Europe Nouvelle 30.4%, MC Premium Eastern European Equities 35%, UBS Central Europe Equity Fund 36% and ACM/IBA Emerging Europe Portfolio 29.3%.
Russia witnessed strong buying interest on the back of favourable macroeconomic data and positive sentiment surrounding the end of the battle between Putin and the country's oligarchs.
Aldhous commented: "Putin's success in establishing his authority against the oligarchs, together with his announcement that post-Soviet privatisations would not be overturned, contributed to the market's rise.
"In addition, progress was made regarding the break-up of the electricity monopoly, UES, in terms of minority shareholders protection."
This had been one of the main factors dampening demand for the market over the previous few months.
Further good news came in the form of the Upper House's approval of the tax bill simplifying income tax at a rate of 13% and sustained oil price strength.
Greece fell 14.5% last month and continued to see limited demand for its equities as it progresses towards becoming part of the developed market indices. Aldhous said: "Greece is still regarded by a few managers as a defensive play, but most remain concerned about the level of valuations and the level of future demand for the market."
Turkey's market dropped by 8% and continued to experience a liquidity squeeze following the huge $1.9bn Turkcell offering at the start of July.
Aldhous said: "There was little evidence of buying into the market and the consensus would suggest that it is likely to remain fairly flat for the foreseeable future."
Funds which favour the Russian market are: Activest Lux Osteuropa Fund 45.5%, CGU PP Eastern European Growth Fund 43.9%, Invesco Taiga Fund 43%, Julius Baer Central Europe Stock Fund 40.2%, RG Eastern Europe Equity Fund 36.2%, CS Equity Fund (Lux) Eastern Europe and Schroder Eastern European Fund 48.9%.
Funds are underweight in the Czech Republic but not to the extent as they are in Slovenia, Croatia and the Baltics. They include ABN Amro Eastern European Equity Fund 16.2%, Danubia Invest 16.8%, Indocam Europe Nouvelle 16.4%, MC Premium Eastern European Equities 17% and UBS Central Europe Equity Fund 16.9%.
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